Chow Tai Fook Profit plunges 23pct on gold price rebound

Chow Tai Fook Jewellery Group Ltd. profit fell 23 percent after sales of its gold products slowed compared with a year earlier when prices of the precious metal had decreased sharply.
Net income for the six months to end-September slumped to HK$2.69 billion (USD347 million) from HK$3.51 billion a year earlier, the jeweler said in a statement to the Hong Kong Stock Exchange yesterday. Sales fell 22 percent to HK$29.3 billion.
Sales of gold products, which accounted for 50 percent of the group’s total, dropped 41 percent to HK$14.5 billion during first half. The plunge in global bullion prices in the same six-month period caused a “gold rush” that created an exceptionally high base, the retailer said.
Pro-democracy protests held near its Hong Kong stores further curtailed customer traffic from China, according to the world’s largest listed jewelry chain. The demonstrations, the most disruptive since China resumed sovereignty over Hong Kong in 1997, were sparked by Beijing’s decision to screen candidates through a committee for the city’s leadership election in 2017.
Chow Tai Fook has said sales at stores open at least a year plunged 24 percent in October as protests prevented customers from getting to some outlets.
Sales at stores open at least a year decreased 31 percent compared with a 33 percent rise a year earlier, with such stores in mainland China dropping 20 percent and those in Hong Kong, Macau and Taiwan plunging 41 percent, Chow Tai Fook said. Revenue of gem-set jewelry, which made up of 28 percent of the total, rose 25 percent to HK$8.3 billion during the period, the company said in yesterday’s statement.
Chow Tai Fook’s sales growth in the current fiscal year may lag its pace last year amid slowing economic growth, the effects of China’s anti-corruption measures and austerity drive, Chairman Henry Cheng had said in June.
Chinese President Xi Jinping’s clampdown on banquets and gifts by officials since he took over as the Communist Party chief in November 2012 has dented sales of luxury goods.
Chow Tai Fook, which is celebrating its 85th anniversary this year, had 2,191 outlets as of end-September after opening a net of 114 points of sales in the six months period.
The company said yesterday it plans to double its number of points of sales in the next 10 years, including in tourist spots outside its main markets in Greater China, “to capture the spending power of the affluent outbound mainland Chinese tourists.”
Founded in 1929 in the southern Chinese city of Guangzhou, the jeweler was named after founder Chow Chi-yuen. “Tai Fook” means “big blessing” in Chinese.
Shares of Chow Tai Fook rose 0.4 percent yesterday to HK$10.42 at the close of trading in Hong Kong before the earnings’ release. The city’s benchmark Hang Seng Index lost 0.2 percent. Moxy Ying, Bloomberg